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Business Interruption remains the second biggest risk facing organizations today, the same rank it held in our previous survey.
Source: Aon's 2023 Global Risk Management Survey
Business interruption is the loss of income or profit suffered when an organization’s operations are suspended or reduced as a result of direct or indirect (contingent) loss, such as through property damage or a cyber attack. An organization might see a loss of revenues, an increase in operational costs in order to maintain sales — or both effects at the same time.
The threat that business interruption poses to businesses was clearly demonstrated during the summer of 2023, when oil and gas processing plants across Canada shut down in response to wildfires, halting production on the equivalent of 240,000 barrels of oil a day.
Losses arising from business interruption can be significant and even put an organization’s survival at risk. Disruption events can come in many forms and affect reputation, customer trust, cash flows and much more, making this a key concern for businesses.
Traditionally, organizations looked at the possible disruptions caused by their own losses — for example, a fire, explosion, or natural catastrophe that might damage their premises. Over the past couple of decades, companies have broadened their lens to include supply chain disruptions and risks related to losing customers, suppliers or utilities.
In recent years, business interruption has become increasingly complex as the world has become even more volatile and interconnected:
Despite three quarters of respondents stating they are prepared for a business interruption event, nearly a third suffered a loss in the last twelve months.
of respondents suffered a loss from this risk in the 12 months prior to the survey.
Source: Aon's 2023 Global Risk Management Survey
of respondents stated their organizations were prepared for this risk.
Source: Aon's 2023 Global Risk Management Survey
Both pre-loss preparedness and post-loss reaction are critical in limiting the impact of business interruption.
Organizations should regularly revisit and update their crisis management and business continuity plans. These plans substantially reduce the impact of an event and can be a major differentiator in whether a company recovers from a disruption.
On a tactical level, multiple sourcing is a tried-and-tested way of reducing the risk of supply chain disruption. More recently, some companies have also chosen to increase their inventory as a measure against short disruptions. This approach provides further protection, but holding stock can come with additional financial costs.
An insurance policy is an important part of incident reaction plans, as it covers losses and protects assets. Companies should be in regular contact with their brokers and insurers to keep their plans up-to-date. Seeking professional advice for handling and presenting an insurance claim can free up the organization to focus on production and clients, thus cushioning the impact of a business disruption.
If a loss does occur, companies should mitigate the effects by maintaining business operations, securing the means of continuing work and focusing on recovery. Crisis management and business continuity plans ensure these tasks are manageable even in the middle of a crisis.
Business Interruption remains the second biggest risk facing organizations today, the same rank it held in our previous survey.
Source: Aon's 2023 Global Risk Management Survey
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